Policy Address

III. Housing and Land Supply

My Belief

46. As I stated in the Policy Address last year, the housing policy of the current-term Government comprises four elements. First, housing is not a simple commodity; while maintaining respect for a free market economy, the Government has an indispensable role to play in this area. Second, we will focus on home-ownership and strive to build a housing ladder to rekindle the hope of families in different income brackets to become home-owners. Third, we will focus on supply and, based on the Long Term Housing Strategy (LTHS), increase the supply of housing units. Fourth, when new supply is not yet available, we will optimise the existing housing resources to help families that have long been on the waiting list for public rental housing (PRH) and residents in poor living conditions.

47. To implement the aforesaid housing policies and meet the demand for land and housing in the course of our economic development, it is imperative for us to increase land supply. We must make bold decisions, overcome all difficulties and develop land resources in a resolute and persistent manner. To prevent the acute problem of land shortage from emerging again, the determination of the Government to identify and produce land and build a land reserve should never waver in face of short-term changes in economic environment or fluctuations in property prices.

48. Our people will call Hong Kong their home only when there is adequate housing for all to enjoy life in this city, and it is the Government’s responsibility to provide suitable housing for families in different income brackets. With the persistent imbalance in housing demand and supply, the average waiting time for PRH has lengthened and prices of private housing, which have been rising substantially in recent years, are well beyond the affordability of ordinary families. During my term of office, I will increase the ratio of public housing, allocate more land to public housing development3, and undertake that 70% of the housing units on Government’s newly developed land will be for public housing.

Current Situation

49. Surging property prices and shortage of housing supply are major livelihood concerns of the public. The overall private residential price in August 2018 was historically high, registering a 16% increase over the same period last year. The index of home purchase affordability (i.e. the ratio of mortgage payment to median income of households) also continued to deteriorate to 74% in the second quarter this year, and was above the annual average of 67% in 2017. At present, there are over 150 000 families and elderly singletons waiting for PRH, with an average waiting time of 5.3 years.

Housing Policy

50. Of the six new housing initiatives I announced in June this year, the most important one is the revision of the pricing mechanism of subsidised sale flats (SSFs) to the effect that the selling prices of these flats will no longer be linked to market prices of private flats. Instead, it will be determined primarily with reference to the affordability of applicants. This is well received by the community and the upcoming sale exercises are expected to attract a large number of applications. Following the new pricing policy, the Hong Kong Housing Authority (HKHA) has reopened applications for Home Ownership Scheme (HOS) 2018. The sale of the first project under the regularised Green Form Subsidised Home Ownership Scheme (GSH) and the “Starter Homes” (SH) pilot project for Hong Kong residents provided by the Urban Renewal Authority (URA) will also be launched subsequently. These three projects will provide a total of 7 426 housing units.4

51. The revised pricing mechanism, together with the arrangement for buyers to obtain mortgage loans of up to 90% or even higher loan-to-value ratio, will render future SSFs affordable to the target households. The monthly mortgage payment will generally not exceed 40% of the total household income.

The Hong Kong Housing Society

52. As an important partner to the Government in implementing housing policies, the Hong Kong Housing Society (HKHS) has played an active role in providing PRH units and SSFs for low and middle-income families. As the new HOS pricing mechanism will affect the selling prices of SSFs developed by the HKHS and may have financial impact on the HKHS, the Government will review the land premium arrangement for the HKHS’ projects. In addition, the Government is prepared to support the HKHS in redeveloping its aged rental estates with a view to increasing the supply of public housing units. The Government has decided to allocate one of the sites in Kai Tak, which was re-allocated for public housing as announced in June this year, to the HKHS for the redevelopment of Chun Seen Mei Chuen in the vicinities. The remaining new units on the Kai Tak site can also be dedicated to rehousing other eligible non-owner occupier households affected by government development or URA projects.

Buildings Developed under the Civil Servants’ Co-operative Building Society Scheme

53. Some of the buildings developed under the Civil Servants’ Co-operative Building Society Scheme (CBS) are clustered in high-density development areas in the urban districts. Aged and of a low density, these buildings did not fully utilise the plot ratios of the sites concerned. In addition, some of these sites are in the vicinity of existing public housing estates and their ancillary facilities. By kicking start the redevelopment of these buildings, we can increase housing supply.

54. In this connection, I will invite the URA to identify one or two clusters of CBS sites suitable for high-density development as pilot sites, and explore the redevelopment of the sites in accordance with the usual project implementation approach adopted by the URA. If we can fully utilise the plot ratios of the sites through redevelopment, we will request the URA to earmark some of the resumed land for public housing development. The dedicated rehousing approach of the HKHS mentioned earlier can also help address the accommodation issue arising from the redevelopment of CBS buildings.

Redevelopment of Tai Hang Sai Estate

55. Tai Hang Sai Estate in Shek Kip Mei is a private rental housing estate catering for low-income families at below market rentals. It is constructed and managed by the Hong Kong Settlers Housing Corporation Limited (HKSHCL), which is a non-profit-making organisation. The HKSHCL plans to redevelop the estate in situ in phases, and is now consulting the affected households on rehousing arrangements. On the premise that the HKSHCL will make proper rehousing arrangements for its tenants, the Government has clearly indicated that we will firmly support the HKSHCL in taking forward the redevelopment project as soon as possible and will provide the necessary assistance, with a view to improving estate facilities and increasing housing supply.

Review of the Long Term Housing Strategy

56. On the basis of my principles and policies on housing, the public/private split of the future ten-year housing supply target under the LTHS may need to be adjusted. In fact, there are divergent views as to whether the public/private split of new housing supply in the next ten years should be maintained at 60:40. The THB will have full regard to the latest developments and views from various sectors when announcing the next ten-year housing supply target.

Efficient Use of Public Housing Resources

57. To increase short-term housing supply, I suggest that the HKHA and the HKHS consider implementing the following three new initiatives:

  1. in the light of the operational experience of the HKHS’ pilot scheme, the HKHA to join the scheme and allow owners of HKHA’s SSFs with premium unpaid to sublet their flats to needy families;
  2. accept the HKHS’ recommendation of launching a “Flat for Flat Pilot Scheme for Elderly Owners” for its SSFs with premium not yet paid. Under this scheme, owners aged 60 or above who have owned their flats for at least ten years can sell their original flats and then buy a smaller SSF flat in the secondary market without payment of premium; and
  3. The HKHA to launch a new initiative whereby under-occupation households whose family members are all aged 70 or above are allowed to enjoy lifetime full rent exemption upon their transfer to smaller, new or refurbished units.

Increasing the Supply of Transitional Housing

58. Before new supply becomes available, a task force under the THB will actively facilitate the implementation of various short-term community initiatives to increase the supply of transitional housing. As of today, the Community Housing Movement operated by the Hong Kong Council of Social Service has introduced a number of projects providing a total of 153 units; the Modular Social Housing Scheme on Nam Cheong Street in Sham Shui Po, with funding support from the Community Care Fund, is expected to provide a total of 90 units. On the relaunching of measures to revitalise industrial buildings, we will allow wholesale conversion of industrial buildings for transitional housing. The Government is also actively supporting non-profit-making organisations to explore the feasibility of constructing pre-fabricated modular housing on idle private and government sites. A number of such projects are underway.

Land Supply

59. In the past year, the current-term Government has restored the housing ladder and revised the prices of SSFs. Finding land is the pressing problem that we need to tackle urgently. In fact, the shortage of land supply not only leads to a shortage of housing supply, but also affects people’s quality of life. From child care centres to elderly care facilities; from basic education and healthcare services to leisure open space and cultural and recreational facilities; and from maintaining the advantages of traditional trades to promoting new economy industries, land is strictly necessary. In short, the improvement of livelihood and the development of the economy and transport infrastructure of our society hinge on land resources, without which all strategies or plans will end up in empty talk.

Land Development – a Daunting Task

60. In November 2011, as the then Secretary for Development, I launched a public engagement exercise entitled “Enhancing Land Supply Strategy”, which proposed six measures including reclamation outside Victoria Harbour, rock cavern development, optimising the use of brownfield sites and agricultural land etc. I made the following remarks publicly at that time: “It is utterly difficult to developing land resources, and it is getting increasingly even more difficult. Nevertheless, we must rise to the challenge for the sake of Hong Kong’s long-term development.” Now seven years have passed, the larger scale land development projects are still struggling with hurdles along the way. While the last term Government raced against time to press ahead with rezoning as a major short-to-medium term measure and various new development areas (NDAs) projects in Kwu Tung North/Fanling North, Hung Shui Kiu, Yuen Long South as well as Tung Chung, these efforts are constrained by project complexities and lengthy processes. Adding to these is the long lead time required to resolve the conflicting interests of land owners, residents and other stakeholders affected by land development, which invariably resulted in delays or scaling back of the projects.

Task Force on Land Supply

61. The Task Force on Land Supply (Task Force) set up in September last year has shouldered the task of forging collaborative deliberation with the public, in an attempt to build the greatest consensus in society. The chairman, vice-chairman and members of the Task Force have been fully committed to the five-month long public engagement exercise which was concluded last month. I would like to express my heartfelt thanks to the Task Force and look forward to receiving the full report of the Task Force by the end of this year.

62. Half a month ago, upon my request, the Task Force shared with me its preliminary key observations. While public attention has centred on the observations in respect of individual land supply options, I am attracted to the Task Force’s three general observations that the community broadly agrees that land supply is pressing; that we should be prepared for the rainy days; and that a multi-pronged approach should be adopted. I now present some plans on land supply in line with such policy objectives. As regards the further analysis of individual options, I will give detailed consideration to the Task Force’s recommendations in its full report.

Lantau Tomorrow

63. Lantau, the largest outlying island in Hong Kong, is home to the Hong Kong International Airport and the gateway to the world. Upon the commissioning of the Hong Kong-Zhuhai-Macao Bridge (HZMB), the transport connectivity between Hong Kong and other cities in the Greater Bay Area will be further improved, making Lantau a “Double Gateway” to the world and other Greater Bay Area cities.

64. The Government’s vision for the development of Lantau covers the development areas at the artificial islands near Kau Yi Chau and Hei Ling Chau in the Central Waters, North Lantau as well as the coastal areas of Tuen Mun including the River Trade Terminal after re-planning and Lung Kwu Tan, to be supported by a new set of transport networks connecting various development areas. The vision aims to instil hope among Hong Kong people for economic progress, improve people’s livelihood and meet their housing and career aspirations. We will realise this vision in the coming 20 to 30 years through the following five policy directions and investment.

  1. Unleashing land potential, increasing land supply and developing a liveable near carbon-neutral city

    To unleash the development potential of existing land on Lantau, we kicked off the statutory planning procedures for the Mass Transit Railway Corporation Limited’s (MTRCL) Siu Ho Wan Depot Site early this year. It is estimated that its topside development can provide no less than 14 000 residential units in the medium to long term. We hope to develop the depot site into a Siu Ho Wan community with public and private housing as well as community facilities, with due regard to factors including planning, public-to-private housing mix, transport infrastructure, development timeline and MTRCL’s participation etc.

    The Government has decided to commence immediately a study on phased reclamation near Kau Yi Chau and Hei Ling Chau for the construction of artificial islands with a total area of about 1 700 hectares. The study and design work will begin shortly with the aim of commencing the first phase of reclamation in 2025. The land reserve to be provided by reclamation could be planned for building 260 000 to 400 000 residential units. These units, with 70% being public housing, could accommodate a population of 700 000 to 1 100 000. We anticipate that the first batch of residential units could be available for intake in 2032. The construction of artificial islands in the Central Waters helps meet the housing, economic and employment needs in the long run, which ties in with the overall population growth and economic development of Hong Kong. We can make use of the additional land reserve to thin out the dense population in urban areas. This will facilitate the redevelopment of old districts, improve living environment, and achieve a more balanced spatial development pattern for the territory.

    We plan to develop near carbon-neutral pilot zones on the artificial islands at Kau Yi Chau and Hei Ling Chau. We will explore the wider use of renewable energy, energy efficient design and technologies, green transport, higher greening ratio, more advanced recycling and waste management measures etc. to progress towards the long-term vision of carbon-neutral community. On the other hand, we will adopt city concepts that are smart, green and resilient to environment and climate in the Tung Chung New Town Extension for their first trial.
  2. According priority to transport infrastructure, reinforcing advantages of a “Double Gateway”

    One of the key development axles of the Lantau Tomorrow Vision is to accord priority to transport infrastructure development. We will study the construction of a new major transport corridor to link up the coastal areas of Tuen Mun, North Lantau, the artificial islands in the Central Waters and the traditional business centre in Hong Kong Island North with roads and railways, and take forward works for a highway parallel to the North Lantau Highway and the Lung Mun Road improvement. This new transport corridor will not only shorten the travelling distance between the Chek Lap Kok airport and Hong Kong Island, thereby strengthening the role of Lantau as a “Double Gateway” and facilitating the formation of the Western Economic Corridor, but also release the development potential of the artificial islands in the Central Waters, reclaimed land at Lung Kwu Tan, as well as coastal areas such as the River Trade Terminal, Tuen Mun East and Tuen Mun West. Besides, the corridor will help relieve the congestion at the West Rail and Tuen Mun Road during peak hours, and significantly improve the transport system in the North West New Territories as well as enhance the flexibility and resilience of the entire transport network of Hong Kong.
  3. Developing the Aerotropolis and the third Core Business District to promote economic development

    The Government will invite the Airport Authority Hong Kong (AAHK) to submit a proposal for the topside development at Hong Kong Boundary Crossing Facilities Island. Such development, coupled with the Three-runway System, high value-added logistics centre at the South Cargo Precinct, the SKYCITY project, as well as the AsiaWorld-Expo, of which a private interest was recently acquired by the AAHK, and its Phase Two development, will create at Lantau an Aerotropolis connecting the Greater Bay Area and the world, thereby strengthening and enhancing Hong Kong’s position as an international business centre.

    The artificial islands formed by reclamation in the Central Waters will evolve into the third Core Business District (CBD) of Hong Kong following Central and Kowloon East. Capitalising on the favourable geographical advantages, the artificial islands will link up Central/Sheung Wan area with Lantau via a new transport system. Complementing traditional CBDs and synergising with the advanced Aerotropolis, the artificial islands will create extensive room for the development of conventional and emerging industries. Our preliminary estimate is that about 340 000 jobs will be created by developing the artificial islands.
  4. Enhancing environmental capacity for sustainable development

    The fourth key development axle of the Lantau Tomorrow Vision is sustainable development. Upholding firmly the planning principle of “development for the north, conservation for the south”, we will carry out infrastructure and development projects along the direction of “conservation to precede development”. A $1 billion Lantau Conservation Fund will be set up to promote and implement conservation of rural Lantau, and to pursue livelihood improvement works in remote villages and communities.

    We will also review the legislation concerned and map out more effective means to control landfilling, dumping of wastes and associated development activities causing environmental damage to areas of high ecological values at Lantau, with a view to enhancing protection of the natural beauty of these areas.
  5. Increasing leisure and entertainment facilities to promote a healthy lifestyle

    Lantau has a wealth of green and blue natural resources. Given proper measures for environmental protection, it has the potential of developing into a leisure and entertainment destination of choice. We will provide additional pedestrian-friendly walkways and extend the cycle track network as linkage to the Tung Chung New Town, and explore the feasibility of connecting Tung Chung with the airport island, with a view to encouraging green living. We will also formulate and implement in phases a comprehensive Lantau Trails and Recreation Plan for the development of a hiking trail network connecting as many heritage, ecological and recreational hotspots as possible, provision of diverse leisure experience and promotion of healthy living.

    Sunny Bay will be developed into a leisure and entertainment node, where mega-scale activities as well as international or local major competition events will be held to attract visitors. The development of Sunny Bay will create synergy with the Hong Kong Disneyland Resort expansion project.

65. The Lantau Tomorrow Vision involves the overall planning of the city and implementation of a number of major infrastructure projects in the coming decades, and requires the efforts of various bureaux, government departments and Non-Governmental Organisations (NGOs), which entails a large amount of meticulous co-ordination work. As the Lantau Tomorrow Vision is a priority area of the current-term Government, I will set up as soon as possible a dedicated co-ordination office, which is directly accountable to me, to steer the overall direction as well as co-ordinate and monitor the planning and implementation of the programme. This office will be expanded as needed to ensure that the policy and implementation could be effectively matched.

Development of Brownfield Sites in the New Territories

66. Brownfield sites in the New Territories are disturbed greenfield or agricultural land. Using them for housing development is a logical and natural choice. This seemingly easy option is in fact fraught with difficulties. I must first point out that developing brownfield sites has always been an important part of our land supply strategy. NDAs projects under planning and implementation, including those in Kwu Tung North/Fanling North, Hung Shui Kiu, Yuen Long South etc., will cover about 340 hectares of brownfield sites in total, while another some 200 hectares are within the New Territories North strategic growth area. From public consultations, rezoning, to land resumption and clearance, as well as compensation and rehousing, implementation of NDA projects invariably requires a decade or so. For example, the North East New Territories Development (referred to as Kwu Tung North/Fanling North NDAs nowadays) was initiated in 2008 when I was then the Secretary for Development, but land resumption has yet to start formally, not to mention commencement of works.

67. Nevertheless, I share the community’s aspiration about developing brownfield sites to increase housing supply and improve the current haphazard landscape in some parts of the New Territories. I have asked the Development Bureau (DEVB) to co-ordinate among relevant departments to advance the study about developing brownfield sites in New Territories North, and initiate a study on the remaining 760 hectares of scattered brownfield sites to identify those with greater development potential. As many brownfield sites are now used for port back-up, logistics operations, recycling workshops, and storage of construction machinery and building materials, etc., we need to consider how these existing operations can be handled or relocated in light of the needs of economic development. We expect to complete within this year two studies on brownfield operations that have commenced earlier on, with a view to formulating relevant policy strategies and implementation measures.

Land Sharing Pilot Scheme

68. According to some open information and rough guesstimate, private developers hold altogether no less than 1 000 hectares of agricultural land in the New Territories. In the past five years, the Town Planning Board (TPB) processed some 20 rezoning applications for private housing development in the New Territories involving about 40 hectares of land in total. Because of inadequate infrastructure support, planning considerations or local objections, only seven applications have been approved by the TPB. These approved applications cover an area of about 18 hectares with an estimated supply of about 2 800 housing units. The plot ratio is far lower than that of public housing resulting in an underutilisation of the land concerned. If private land is covered by Government’s plans for public housing development or provision of infrastructure facilities, we will continue to resume it pursuant to the Lands Resumption Ordinance. However, if we want to unleash earlier the potential and make better use of privately owned land not covered by Government’s planned development, we believe we can do so through a Land Sharing Pilot Scheme (LSPS) that is based on fairness and high transparency, so as to meet the needs of both public and private housing in the short to medium term.

69. The Secretary for Development will formulate the feasible arrangements for the LSPS along the following directions and principles:

  1. the Government will openly invite land sharing applications. Applicants are required to explain clearly in their proposals how the private land they hold could, in the short to medium term, bring about substantial increase in housing flats through means such as enhancing infrastructure, increasing plot ratio, changing land uses, etc. The increased floor areas will be shared between the Government and applicants, among which not less than 60% to 70% have to be used for public housing development mainly SSFs. The types of public housing to be provided will depend on factors like subsidised housing policies, site location and provision of ancillary facilities;
  2. applicants should comply with all applicable statutory procedures and land administration regimes, including submitting to the TPB rezoning or planning applications and paying to the Government land premium at full market value in respect of lease modifications for the private housing and ancillary commercial facilities in the development;
  3. to take advantage of the efficiency of the private sector and expedite development, applicants will be responsible for building infrastructure facilities that can support the development concerned or even benefit the local community. Subject to assessment by the Government on cost effectiveness, the relevant cost will be deducted from land premium. Besides, applicants are required to consolidate private property interests within the development site on their own. If the infrastructure facilities encroach onto private land, the Government may consider, on the basis of public interest and in line with established arrangements, resuming the land for the provision of such facilities; and
  4. the application mechanism must be fair, open and transparent, allowing participation by all eligible private land owners. A set of transparent criteria and procedures must also be put in place for processing applications and selecting suitable projects. In addition, information of the pilot scheme must be released in a timely and transparent manner so as to dispel public worries. In this connection, applications will be considered by the Land and Development Advisory Committee (LDAC) which comprises mostly non-official members, before submitting to the Chief Executive in Council for approval.

70. I will also ask the DEVB to set a time limit, and a cap on the total area to be handled, for the pilot scheme so that the Government may process projects that are the most effective and beneficial in the short and medium term. I hope the pilot scheme can be introduced next year after making reference to the final report of the Task Force.

Revitalisation of Industrial Buildings

71. Under the previous revitalisation scheme for industrial buildings, the Government has so far approved a total of 124 applications for wholesale conversion and redevelopment of aged industrial buildings. The scheme provides more floor area to meet Hong Kong’s changing social and economic needs, and makes better use of our valuable land resources. Having reviewed its effectiveness, we have decided to reactivate the revitalisation scheme for industrial buildings. The new scheme has been expanded to include wholesale conversion of industrial buildings for transitional housing use.

72. The new scheme will include the following measures:

  1. the Lands Department will accept owners’ applications, on a three-year time-limited basis, and exempt the waiver fees incurred, for wholesale conversion of industrial buildings aged 15 years or above in “Commercial” (C), “Other Specified Uses” annotated “Business” (OU(B)) and “Industrial” (I) zones into permissible planning uses. Compared with the previous scheme, we propose incorporating a new condition that the applicants should designate 10% of the floor area for specific uses prescribed by the Government upon completion of such conversion works;
  2. to encourage owners to redevelop industrial buildings constructed before 1987, we will extend the application of the present planning policy about suitably increasing the maximum permissible domestic plot ratio within certain “Residential” (R) zones, so as to allow relaxation of the maximum permissible non-domestic plot ratio by up to 20% for redevelopment projects of these pre-1987 industrial buildings located outside “R” zones in Main Urban Areas and New Towns. Individual applications have to be made to the TPB within three years, and the modified lease should be executed within a specified period after the town planning approval; and
  3. we will allow revitalisation of industrial buildings to provide transitional housing. In practice, the Government will exercise flexibility in the application of planning and building design requirements, and charge a nil waiver fee for the specific use of transitional housing, if owners provide transitional housing in portions or entire blocks of industrial buildings located in “C”, “Comprehensive Development Area”, “OU(B)” and “R” zones which have already undergone or will pursue wholesale conversion into non-industrial uses. We would encourage owners to collaborate with non-government institutions to provide transitional housing, so as to provide more suitable accommodation for those yet to be allocated PRH or other grassroots citizens with housing needs. A task force under the THB will provide one-stop, co-ordinated support to facilitate the community in pursuing transitional housing.

73. Owing to multiple ownership of some industrial buildings, owners may not be able to reach a consensus in the immediate future over wholesale conversion or redevelopment of the buildings. As such, we will also introduce the following measures to optimise the use of existing industrial buildings:

  1. relaxing the waiver application policy on a time-limited basis (for five years initially) to permit the arts and cultural sectors and creative industries to operate at individual units of existing industrial buildings without the need for making separate waiver applications and paying waiver fees, so long as such uses are permitted under the planning regime;
  2. with due regard to public safety, widening the permissible uses of buffer floors to cover telecommunications exchange centres and computer/data processing centres, so as to facilitate conversion of lower floors of industrial buildings into non-industrial uses; and
  3. promulgating a wider definition for “godown” uses under lease provisions of industrial buildings to cover cargo handling and forwarding operations and recyclable collection centres.

The DEVB will announce the specific details of the above measures in due course, and launch the measures progressively by the end of this year.

Expediting Supply by Streamlining Control

74. To expedite housing and land development, the DEVB has set up a steering group to explore ways to streamline the process of development approval for departments under its purview. We have also established a joint sub-committee under the LDAC to build consensus on the streamlining proposals. In September this year, we consulted the joint sub-committee on the first batch of proposals on how to rationalise the approval of building height, greening coverage and landscape requirements, and the joint-committee generally supported the proposals. In the coming year, the steering group will continue to examine carefully if there is any room for streamlining the approval process, and will implement the necessary arrangements progressively.